ASX Release

2 January 2015

Agreement reached with Castlelake

As  previously  announced,  on  Friday  5  December  2014  the  US  Federal  Bankruptcy  Court  refused  an  application  by  Castlelake  LP  to  set  aside  the  bankruptcy  of  Marion  Energy,  Inc.    However,  the  Court  also  refused  an  application  by  Marion  Energy  Inc  ("MEI")  to  allow  super-­‐priority  for  working  capital  funding  during  the  bankruptcy  period.    The  Court  ordered  that  Marion  Energy  Inc  would  have  bankruptcy  protection  from  its  creditors  until  1  June  2015.  
Since  that  time,  the  board  of  Marion  Energy  Inc  had  been  in  discussion  with  Castlelake  LP  ("Castlelake")  in  relation  to  funding  the  working  capital  requirements  of  MEI  during  the  bankruptcy  period  but  those  discussions  did  not  result  in  agreement.    That  left  MEI  with  no  option,  but  to  bring  the  matter  back  to  the  US  Federal  Bankruptcy  Court  on  Wednesday  17  December  2014.    At  that  time,  as  previously  announced,  the  Judge  refused  to  vary  his  earlier  orders,  leaving  the  parties  in  a  continuing  impasse.  
Since  that  time,  further  discussions  have  taken  place  with  Castlelake.    Those  discussions  were  protracted,  but  have  now  resulted  in  a  workable  agreement.    This  agreement  is  subject  to  approval  by  the  US  Federal  Bankruptcy  Court.    The  key  points  of  the  agreement  are  as  follows:  

• Castlelake  will  provide  working  capital  funding  to  MEI  in  the  short  term  by  means  of  a  DIP  loan  governed  by  an  agreed  budget  (containing  restrictions  on  uses  for  funds).

• Marion  and  Castlelake  will  jointly  engage  Riviera-­‐Ensley  Advisers  (REA)  to  run  a  

sale  process  of  the  Clear  Creek  and  Helper  fields.

• REA  will  collect  any  non-­‐binding  offers  by  25  February  2015.

• On  March  2nd,  REA  will  determine  if  there  is  sufficient  interest  in  the  Clear  Creek  
field  such  that  it  is  "more  likely  than  not"  that  a  sale  can  be  finalized  by  1stJune  
2015  ("Viable  Sale  Determination").

• Simultaneously,  the  Company  and  MEI  will  continue  to  attempt  to  refinance  the  Castlelake  credit  facility.

• If  by  March  2nd2015  one  or  more  refinancing  term  sheets  have  been  received,  subject  only  to  final  documentation,  a  pre-­‐agreed  objective  third  party,  Gil  Miller,  will  determine  if  a  refinancing  is  "more  likely  than  not"  to  close  before  May  4.    If  so,  the  parties  will  continue  to  pursue  the  refinance  with  the  approval  of  the  court  ("Viable  Refinancing  Determination")

Suite 802, 530 Little Collins St. Melbourne Victoria 3000

Marion Energy Limited

ABN 99 000 031 292

Tel: +61 3 9620 2223 Fax: +61 3 8692 9976

• If  there  is  insufficient  interest  in  a  sale  or  refinancing,  Castlelake  will  

take  possession  of  the  Clear  Creek  field  by  credit  bidding  its  outstanding  debt  
amount  by  6thMarch  2015.

• MEI  and  Castlelake  have  also  agreed  to  engage  Pat  Merritt  to  oversee  all  aspects  of  

operations  at  the  Clear  Creek  field.

• Doug  Flannery  will  continue  to  be  retained  by  MEI  as  the  Vice  President  in  control  

of  Marion's  budget  and  cash  disbursements.

• Castlelake  will  stay  any  action  against  Marion  Energy  Limited  during  this  process

A  further  announcement  will  be  made  following  application  to  the  US  Federal  Bankruptcy  Court  for  approval  of  this  agreement.  

Marion Energy Limited

Per:  

Nick  Stretch  Company  Secretary  

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